Wednesday, 1 December 2004
Budget Statement 2005: Motion.
I am glad to be here to outline the provisions of the budget to Senators and to have the opportunity to listen to the debate to come. Most Members have heard what the Minister said in the Dáil and are no doubt forming their initial reactions.
As an aid to that process, I will highlight some of the more pertinent points.
To begin with, we must be clear what exactly it is we are about. The Government wants to continue to ensure that we protect and increase employment in the increasingly competitive environment in which we find ourselves. We must also continue to modernise our economy through major capital programmes. These objectives can be fulfilled in many ways but our aim is to distribute the fruits to all through better services and a fairer sharing of resources, while being mindful of those most vulnerable in our society, particularly those with disabilities. This budget meets those aims.
Before discussing the main budgetary measures, I draw attention to the economic backdrop to the budget. As is always the case, we must be conscious of the international economic outlook because our economy is significantly influenced by what happens around the world. It would be foolish of the Government if it did not acknowledge that there are always risks to any forecast. These include such issues as future developments in the level of oil prices, the evolution of international exchange rates and the international response in terms of interest rates. We must be mindful of all these risks and act accordingly so as not to undermine the future prosperity of all. If there is no major shock from these or other international factors, the prospects for the economy over the next few years are favourable.
The Minister has forecast that in the coming year the economy will grow by 4.7% in GNP terms and 5.1% in GDP terms. Employment is expected to increase by some 35,000, thus ensuring that unemployment will remain low at 4.4%. Price inflation is also expected to average 2.5%, close to the EU average. We must do the right thing and be mindful of our international competitiveness, which must be a key priority for all.
On the basis of this economic view, the Minister has set a number of budgetary targets for 2005. An allocation of almost €45 billion is provided for gross spending on public services, a more than 9% increase on last year. The Exchequer borrowing requirement is set at just under €3 billion, or 2.3% of GNP. A general Government deficit of 0.8% of GDP and a debt ratio of 30% of GDP are set. The objective is to keep growth in spending correlated to revenues while being prudent regarding the level of debt. In this context, the Minister's targets are aimed at helping to contain inflationary pressures, a central theme of Government policy.
Before turning to the specific measures in this budget, it is appropriate to make a few brief comments about overall tax policy. Much has been said in recent times about taxation and what the Minister should or should not do. The key principle is to ensure the burden of taxation is low and has a broad base, thereby ensuring the amount of revenue generated is sufficient to meet the many important social needs faced by society. This budget targets resources at the lower paid. Accordingly, the Minister has increased the employee tax credit by €230. Moreover, the personal tax credit is increased by €60 for single persons and €120 for married couples to bring them to €1,580 and €3,160 per annum respectively. These improvements in the credits ensure that all those on the minimum wage are fully outside the tax net, a key commitment in An Agreed Programme for Government. As a result of the changes, more than 650,000 of the 1.9 million income earners will be exempt from paying tax on their earnings. In recognition of our inability to do so in the last two budgets, given the more difficult economic circumstances that prevailed, the standard rate income tax band is increased by €1,400 per annum for all earners, together with increases for single parents and widows. This band-widening takes 52,100 taxpayers off the higher rate of tax.
The Minister also made a number of changes to specific tax reliefs for the aged, the disabled and for widows. Senators will find the details set out in the budget book. A further change that will be of benefit to low paid workers is the substantial increase in the threshold for the health levy. To those who claim this Government does not care, I point to one significant fact in this area. Since 1997, the percentage of the total income tax bill paid by the lower paid has fallen from 14% to less than 6%.
Senators are aware that there has been much debate in recent times concerning the role played by tax reliefs in the tax system. The Minister has sought a thorough evaluation of the effect of all relevant incentive reliefs and exemptions and asked his Department and the Revenue Commissioners to bring forward proposals that will achieve a balance between the benefit to the investor and the benefit to the common good. Senators will note with interest the Minister's intention to act upon such proposals and his related commitment that the termination dates for various schemes laid down previously in this year's Finance Act will not be changed.
Tax reliefs have a role in promoting fair play. In this regard, I point to the changes made in the area of residential stamp duty. For first-time buyers of second-hand houses, there will be no stamp duty on purchases of up to €317,500 in value and reduced rates on purchases up to €635,000.
This will result in stamp duty savings for first-time buyers of second-hand properties and is another measure targeted at the lower end of the market. Changes are also being made to rent relief to help those living in rental accommodation. These improvements will make a real difference to those concerned.
In recognition of the cost of third level education, the maximum amount of qualifying fees allowable under the scheme of tax relief for such fees paid is increased from €3,175 per year to €5,000 per year for the academic year 2005 to 2006.
In addition, the Finance Bill 2005 will provide for stamp duty relief from the double charge arising from the switching of financial cards such as credit cards. This will facilitate greater consumer choice and improve competitiveness in the area of retail banking.
Regarding indirect taxation, it is significant that the Minister has decided to make no changes to the main VAT and excise rates. This will help to maintain the low level of consumer price inflation, while also being mindful of the impact such increases in indirect taxes have on the less well off in our society. However, the budget contains an excise relief to benefit small craft breweries.
In the area of social welfare, the Government continues to address the needs of the vulnerable in society. This budget demonstrates that the Government is keen to target the resources available at those most in need by announcing an additional full-year spend of €874 million in welfare payments.
I am glad to see that the full personal rate of old age and related pensions will be increased by €12 per week. This means that the old age contributory pension will be €179.30 per week from January 2005. The old age non-contributory pension will now be €166 per week. Unemployment assistance and all other personal weekly social welfare rates will be increased by €14 per week. The lowest full personal social welfare rate will now be €148.80 per week as opposed to €83.04 in 1997.
In recent years, there have been major increases in the level of child benefit. In this regard, I am happy to see that the monthly rate for the first and second child will increase by €10 to €141.60. The comparable rate in 1997 was €38.09. The rate for third and subsequent children will increase by €12 to €177.30. A range of social welfare improvements is set out in the budget summary. I highlight the increase in the family income supplement income thresholds, improvements to the maternity benefit scheme and to the support provided to carers, particularly in respite care.
Citizens rightly expect that they will get value for the money expended by Government on their behalf. There has been considerable improvement in public services in recent years and this year's Estimates as well as today's budget build on this development. The Minister has already indicated that he wants Departments and offices to intensify their efforts to ensure the best possible value for money from the very significant funds being provides in the Estimates. In this regard the Department of Finance will shortly be issuing revised guidelines on the appraisal and management of capital projects to Departments. Work is also ongoing on changes in public sector capital project contracts to ensure that risk is transferred to those best able to manage and control it. Striving for value for money is an ongoing process.
Last year the Minister for Finance announced the introduction of rolling five year multi-annual programmes for all capital investment areas. One result of that decision is that there is a carryover of funds from 2004 to 2005 of €237 million. Together with the additional Exchequer capital spending announced by the Minister, this means that almost €6,300 million will be available for capital spending in 2005.
The Government is committed to improving the infrastructure of the country, thus benefiting the quality of life of all in society. Specifically on transport, an area of great importance for the economy, I note that the 2005-2009 capital envelope includes almost €10.2 billion for investment in transport infrastructure. I am pleased to inform Senators that the Minister has agreed in principle with his colleague, the Minister for Transport, that an extended capital envelope of ten years in the case of transport is appropriate and proposals on this will be put to Government shortly. This is an important initiative which I anticipate will help to improve the planning and delivery of infrastructure in this area. This proposal better reflects the needs of a modern economy.
As Senators are well aware and as we debated at length last evening, decentralisation is of particular interest to me in my role as Minister of State with responsibility for the Office of Public Works. During the last number of days we outlined the progress in this area, putting an end to the speculation of those who are sceptical about this important regional policy.
It has been demonstrated clearly that there is substantial interest in the programme among civil and public servants and this year's budget contains provision for the property related costs associated with our policy on decentralisation. Considerable progress has been made and the implementation of this multi-annual plan is well on track.
I am particularly pleased that the budget contains a special focus on those with disabilities. In the limited time available to me, I will highlight a couple of the significant developments in this area. Senators will be aware that considerable information on this topic is set out in the budget book published today. In the recent Estimates process, the Minister announced an increase in resources for this area of €290 million on the 2004 figure. Today, the Minister has announced a special disability multi-annual funding package with a total value of close to €900 million over the years 2006 to 2009. This includes guaranteed additional current spending of almost €600 million together with an allocation of €300 million out of the revised capital envelopes. I am sure that Senators will join me in welcoming this decision. The bulk of this funding package will go towards investment in services for persons with an intellectual disability and those with autism, services for persons with physical or sensory disabilities and mental health services. It is to focus, in particular, on the provisions of extra residential, respite and day places, extra home support and personal assistance and extra places in community-based mental health facilities.
Finally, I will highlight a number of important measures for the agricultural sector. It is important that we recognise the need for vibrant rural communities. The Estimates process has already delivered a gross Estimate provision of over €1.4 billion for the Department of Agriculture and Food in 2005. In addition to the national Estimates provision, EU direct funded payments to farmers and market supports will amount to almost €1.9 billion in 2005. Some of the features in the Estimates include a significant increase in funding for the rural environment protection scheme and an increase in the allocation for the farm waste management scheme.
In this budget, in order to ensure the viability of a competitive farming community in our modern economy, the Minister has announced the following measures: A new stamp duty relief for exchanges of farmland between two farmers for the purpose of consolidating each farmer's holding will be introduced in the 2005 Finance Bill. This concession will ensure that there is no charge for two years on exchanges of farm land of the same value for consolidation purposes. At present, each farmer is liable to the full stamp duty on property he or she receives. This will be a once-off relief and will apply for a two year period. The measure should assist those in the farming sector to consolidate their holdings in a more sensible and efficient manner; the writing down period of the special tax relief scheme for expenditure on farm pollution control measures will be reduced from seven to three years. This will be of assistance to farmers to help them comply with the EU nitrates directive and is also a welcome environmental development; a provision will be included in next year's Finance Bill to enable farmers not already using income averaging for income tax purposes to average certain payments outstanding under FEOGA direct payments schemes in three equal instalments over the three years 2005, 2006 and 2007; the farmer's flat rate VAT will go up from 4.4% to 4. 8% from 1 January 2005. The rate change will ensure that unregistered farmers are compensated in full for the VAT they bear on their business inputs. There will also be a corresponding increase to 4.8% for the sale of livestock by VAT registered farmers; and finally, the 100% stock relief for young trained farmers and the general 25% for farmers are to be continued for a further two years from 1 January.
I remind the House of the Government's commitment to a fairer share of the resources for all in society. The budget honours this commitment in a number of respects. We have taken those on the minimum wage out of the tax net. Through the widening of the bands we have taken 52,100 taxpayers off the higher rate of tax. We have focused funding on those in most need, such as people with disabilities, and targeted expenditure on increasing social welfare rates well above inflation. We have taken an appropriate approach towards managing the economic conditions which allow for these improvements. We have taken the responsible decisions demonstrating our commitment to invest in our community at all levels.
As the Minister said earlier today, the budget once again demonstrates that the well-being of this society and all of its citizens is in safe hands. I hope Senators will welcome this budget and I look forward to hearing their views.
I welcome a number of the measures contained in the budget, which have been highlighted by the Minister of State. I welcome the changes in services to people with disabilities. The Minister of State referred to yesterday's debate in this House on decentralisation. Last year, decentralisation was the budget. I listened today to hear what its equivalent would be in this year's budget.
There are two issues over which the Government appears to be gloating. I noticed the expression on the face of the Minister of State as the Minister for Finance announced the stamp duty relief for first time house buyers. This is the first time the Government or its immediate predecessor has done anything to improve the lot of people who are buying houses. After an eight year wait, perhaps we should applaud the Government for realising there is a disastrous problem in this area. However, as Deputy Richard Bruton said in the Dáil, eight years is too long to wait for change. The Government should not pat itself on the back to the extent it is. In my part of the world one would expect to pay approximately €250,000 for a second hand home.
The savings for someone buying such a house will be in the region of €7,000, which is twice the first-time buyer's grant that was removed by the Government some years ago in its previous attempt to do something for people trying to buy a house. If people buy a second-hand home in County Kilkenny they will have to renovate it and may wish to extend it, so they will end up paying significant charges as a result of development levies imposed by local authorities. Therefore, most of what the Government is providing in relief in today's budget on stamp duty will be gobbled up.
While it is perhaps significant, optically, that the Government seems to be acknowledging the fact that there is a problem in that area, what it has done is insignificant. As Deputy Richard Bruton rightly pointed out in the Lower House, in the context of Dublin, where the average cost of second-hand homes is greater than the exemption limit, it will have a much more negligible impact than elsewhere. The Government has acknowledged the difficulty so I will give it a star, albeit for slow learning in that area.
The other budgetary provision in which Government Members in the Dáil appeared to take particular pleasure was the removal from the tax net of those on the minimum wage. As Deputy Richard Bruton correctly pointed out, however, this is another con job because in the middle of next year they will be back in the tax net when the minimum wage is increased again. While visually it looks fantastic that these people have been removed from the tax net — we all agree they should be — in a few months they will be back in the net, so what was achieved today will count for nothing.
Perhaps it was mentioned, although I did not see it. Nothing has been done, however, to redress the balance to deal with those who continuously get away with not paying any income tax. Under this budget they will continue to do so. It is wrong and I would like to hear the Minister of State's views on the issue.
Reference was made in the Lower House to the changes made last year by the previous Minister for Social and Family Affairs, and the failure of today's Budget Statement to make any significant reversal to the miserly cuts in last year's budget. It is noteworthy that the Minister did not seek to reverse the decisions made last year. In most cases, we are talking about small amounts of money that would deliver meaningful benefits for people on the margins of society.
We heard much from the Minister for Finance today and I suspect that we will hear a lot from Government Senators about the new caring, sharing Government. If they want the Government to be caring and sharing, however, they should have done something to reverse last year's cutbacks.
Of particular interest to me and other Members is the area of special educational needs. I was disappointed the Minister did not use the largesse at his disposal to make a significant announcement in that regard.
Schools throughout the country have problems in getting special needs assistants for those children who require them. There was nothing in today's Budget Statement to offer any hope for families whose children require special educational needs.
Child care is referred to every time we discuss the economy. I do not know if the Minister mentioned it in passing but he certainly did not deliver any reform in that area. Given the opportunity he had today, I am disappointed that he did not do anything in that regard.
In fluffy language from the Department — such as we heard about decentralisation yesterday — the Minister announced he will implement a review of tax relief schemes. I remain to be convinced, however, that there will be any significant change in many of the current schemes.
Most of those tax relief schemes have served their purpose at this stage. We have heard woolly talk before from the Minister, Deputy Cowen, about initiating a review. I was hoping that some significant changes would be announced in that regard today. We heard nothing either about any reduction in stealth charges that were imposed last year, such as increases in bank charges and the cost of passports. Such increases were announced across the board last year as a way of sneaking an extra couple of million euro here and there to help balance the books. I am happy the Minister did not use his Budget Statement to increase stealth charges further but he could have used the opportunity presented to him today to reduce them.
I was amused by the Minister of State's reference to micro-breweries. I do not see any reason behind today's budgetary proposals on micro-breweries.
Is it to promote competition? Most people would acknowledge that we have a drink problem in this country. For the Minister for Finance to promote the idea of competition in the brewing industry — he used that sentence in his Budget Statement — was shocking.
No mention was made in today's Budget Statement of beleaguered motorists. There was a reference to hybrid engines getting special treatment for VRT. However, given the fuel and road tax increases we have seen in the past few budgets, something tangible should have been provided for motorists.
On the whole, while there are many positive aspects to the budget, I have not seen anything of significance in it. The Minister has tried to provide a little bit for most people but he has not concentrated his fire on specific areas. He should have done so and I am disappointed he did not take that opportunity.
We have a strong financial position with general Government borrowing at 0.8% of GDP. The EBR is 2.3% of GNP but the difference is accounted for by the money put aside for pensions. We have average inflation of 2.5% and it is important that we maintain that level. Employment is to rise by a further 35,000. The 9% increase in expenditure is at the upper limit of what is prudent and at the upper limit of expectations.
If I have one criticism of the budget arithmetic it would be the same as my criticism this time last year and I was proved right far beyond even my expectations. The revenue projections for 2005 show an increase of 5%, which I find incredible. If all the worst case scenarios mentioned in the Minister's budget speech come to pass, that might be a credible figure. Revenue for this year was €2.3 billion more than anticipated. No doubt the defence for that is——
The other aspect indicating a strong economy is the social welfare package of €874 million and the tax package of €682 million which comes to between €1.5 billion and €1.6 billion. To be able deliver such a package is a sign of how well the economy is now going again. We have come through two difficult years with our basic economic strength intact.
From a strategic point of view, while the details have not yet been fully announced, the €6.3 billion for capital investment, representing a 20% increase on what will be spent this year, is important. The IMF identified such investment as a strategic need for the economy at this stage. It will go into the areas of transport, health and environment, which will see increases of €140 million, €40 million and €60 million, respectively. The Minister referred to the €70 million that has been put aside for decentralisation and which was debated here yesterday. I am glad the Minister has confirmed that is motoring ahead and people around the country will also be pleased.
The next significant aspect of the budget is the social package. Old age pensions have increased by 7%, or €12 per week, which is well on track to achieving the target of €200 per week by 2007. Significantly, an even greater increase has been given to the lowest rates of social welfare payments, for example, a 10% increase in unemployment assistance. Child benefit will again increase by a substantial amount. I accept the criticism that can be made that this increase will not quite achieve the targets. However, it is more than €100 per month more than it was in 1997, which represents an incredible increase in that period. In the coming year many people, including the social partners, will debate whether the rationale for the freeze on child dependant allowance, made by the rainbow coalition which felt that was creating a poverty trap, is still valid.
The most important and significant aspect of the budget is the €2.8 billion spending on disability and a multi-annual programme of investment in the health services, education, employment support, adapting accommodation and providing 800 residential places. This is being expanded as fast as we are realistically able to do. A major emphasis has been placed on this area, which is very welcome. As a society we are deficient in what we are doing in that regard. We have a long way to go and we need to take quite large steps from here on in.
I welcome the tax measures in the budget. This is probably the first budget in which no tax increases of any kind have been made. While the employee PRSI ceiling has been raised, PRSI is not strictly taxation as it is a social welfare contribution. For the sake of competitiveness and to keep inflation down it was important not to increase taxation. To remove those on the minimum wage from the tax net is a major achievement and was rightly applauded in the Dáil. The Minister was faced with two possible choices of priorities. He could either have done as he did or provide full indexation of the tax bands back to 2002. I have no doubt that the Government made the right choice and it can do more on the tax bands next year. If some people now on the minimum wage fall back into the tax net again in a few months time, further corrections can be made. The principle has now been established that those on the minimum wage will not and should not be in the tax net.
The widening of the band represents significant progress. In the limited coverage I have heard since the Minister's speech, this has been welcomed by employers. This is part of the thinking behind several social partnership agreements. The feeling is that the combination of tax relief and the agreed wage rises will reduce pressure on employers. This is a good budget for business and farming partly for that reason. The 0.5% reduction in stamp duty has also been welcomed.
In tandem with the nitrates directive, I also welcome enhanced capital allowances for expenditure on farm pollution control. Some of the measures affecting housing are very important. The stamp duty changes for first-time buyers of second-hand houses have long been sought and will be welcomed by many first-time purchasers. The changes in rent relief will also benefit many young people.
We are all very pleased with the budget. It is a real sign of resumed progress and will also underpin further progress.
To put down my markers on this matter, leaving home this morning I said that if the Minister took the minimum-waged out of the tax net, gave €20 to the old-age pensioners and made some gesture in the area of disability, I would welcome the budget. He has certainly achieved two out of three of those targets. In general I welcome the budget. It would be incorrect to do otherwise just for political reasons. For the first time those on the minimum wage have been removed from the tax net, a move I have called for repeatedly in the last five years. The increase in the threshold for stamp duty for first-time buyers of second-hand houses is a positive gesture that should be welcomed and acknowledged as creative and important. If the package of disability measures works as well as is intended, I will welcome it. I was particularly impressed by the Minister's passion when talking about disability and removing people from mental hospitals. I trust someone until I find otherwise so I congratulate the Minister on giving these issues high priority.
I asked earlier if there will be any votes in the Dáil tonight because there were no excise duty or tax increases. Normally on budget night, the bells are ringing all night.
Those are the positive aspects of the budget. I would, however, question the Minister's passing reference to everyone making an appropriate contribution and the statement that he would look at this area. As Senator Phelan pointed out, he let some people off the hook. It would have taken one line, which could still be included in the Finance Bill, and I ask the Minister of State to arrange this. This is not about money but about how we perceive the taxation system. Everyone should pay a minimum amount. I agree with the Minister's point that all these tax reliefs are not for the seriously wealthy. J. P. McManus and Denis O'Brien do not have houses in Courtown and Westport but we do not need some of these schemes anymore.
There was no excuse for not introducing a measure to catch everyone in the tax net. When I talk about percentages of people paying tax at various levels, I am talking about a percentage of the number of people earning an income. That is the only fair way to do it, particularly when we are taking people out of the tax net. Now, approximately 600,000 people will not pay tax, 600,000 people will pay at the standard rate and 600,00 will pay at the higher rate. It is wrong that 50% of taxpayers pay at the higher rate. The ratio should be 2:1, with only half as many paying the higher rate as pay the standard rate.
It is a pity that the old age pensioners did not get €20 and that the stamp duty on bank and credit cards was not abolished. Also, I cannot see why microbreweries got a special mention. There was no need for that.
I frequently find myself in the awkward position of supporting budgets introduced by the Government and then listening to speeches by Senator Mansergh and doubting my judgment.
Only an idiot or someone who has a political axe to grind could oppose this budget. It is obviously a deliberate, calculated and perhaps humane effort to reposition the Government by giving away money. Luckily for Fianna Fáil, the Government is in a position to do so.
The only quibble with the budget is where the money was given because no one can say he disapproves of what the Government did for people with disabilities or old age pensioners. All of these things are laudable and Senator John Paul Phelan or Deputy Richard Bruton or any of the people who opposed this budget would die to be able to do what the Government did today. That is the truth. If we lived in an honest world, we would all welcome this budget and say it was good. We might prefer if the Government did one or two other things but it is good overall and credit is due to the Government for building the economy so this can be done. It should be applauded for bringing the economy to such a stage, as should the former Minister for Finance whose management allowed his successor, the Minister, Deputy Cowen, to give away such an incredible amount of money.
It does not make matters easy for the Opposition but it is a budget few of us can realistically oppose. I would prefer to have seen certain commitments. The era of tax reform and radical thinking in the area is over. We will now have a series of budgets geared towards an election. That is the natural political instinct and we will see a steady as she goes series of budgets plugging the gaps referred to by Deputy Richard Bruton.
It is a pity that the Government did not take the opportunity to tackle tax incentives. I do not accept the explanation of the Minister that all these things are to be examined and we will look at them next year. Some of these, particularly the stallion industry, regardless of the results of the examination that has already been going on for a year, should on principle be taxed.
It is a pity the Minister did not tackle these incentives head-on instead of falling back on the idea of a review. That is a fudge. In general, however, it would be churlish to dismiss or oppose this budget. On the whole it has done good things that the economy can afford.
There are many good aspects to the budget but I will concentrate on the widening of the standard band of income tax. A recent election manifesto claimed that the aim was to have 80% of taxpayers pay at the standard rate. To the best of my knowledge 37% are still paying at the top rate. The pressure on the wage rates in Ireland comes about because people jump from 20% to 50% at the top rate when PRSI is included. That is also a huge disincentive for people to work overtime.
The answer is to introduce an intermediary tax band at 30% but we have lost the opportunity to do that. If that was in place, people would not jump from 20% to 50% in one go. Two major stresses on the economy are that this is an expensive State because of our wage rates and the cost of living. The jump in the tax rates from a low to a very high rate is one reason for the increase in wage rates. We could do something about that and it would take the pressure off inflation, a challenge the Minister mentioned.
Capital expenditure on infrastructure deserves the money that has been put into it. The Minister spoke about value for money. Last week I said in this House that we should not measure the amount of money we spend, we should look for value for money.
I heard the Minister speaking today but I did not see any action. There must be action on the tax bands to avoid people jumping from 20% to 50% tax rates; we must reduce costs and wage rates and secure value for money. If we can take those actions and add them to the good aspects of the budget, it will be a success.
I was explaining to Senator Norris that if he came to this side of the House he would get his full ten minutes. He has not accepted that invitation, obviously.
I welcome the budget and will seek to put it in an overall context before discussing its detail. It is within the overall context that I find most to celebrate. What is being done in the area of disability, social welfare and the more needy in society in terms of the old age pension and so on is very much to be welcomed, particularly the fact that those increases are well in excess of the predicted level of inflation. The main achievement, however, is that the economic ship that has been so well steered by Deputy McCreevy when he was Minister for Finance, continues in the same direction under the Minister, Deputy Cowen. As the Minister explained in his concluding remarks, it required balanced, consistent policy, fairness in the distribution of resources and efficiency in the delivery of public services. That summarises well what the budget is doing and what the Minister, Deputy Cowen, has done.
If we were to increase public spending by an enormous amount, and not to control it, allowing inflation to run rampant, all the achievements that have been gained over several years would have been lost. There is a significant figure here, namely, the relationship between gross domestic product, GDP, and gross national product, GNP. The figures for this year are for GDP to increase by 5.3% and GNP by 4.9% compared to 2001 where GDP increased by 6% and GNP by 3.8%. The significance of that is that the Irish domestic economy is contributing to the engine of growth, whereas previously external investment was the main growth contributor. Those figures are singularly gratifying and something I believe both the previous and current Ministers for Finance can take a great deal of satisfaction from, as indeed can the entire Government.
That overall economic governance has allowed resources to be allocated to the areas most in need. I reject the proposition that this is a repositioning. If one looks at the figures in terms of increases in social welfare, the old age pension and children's allowances over the lifetime of this and the previous Government, one sees that this trend has been consistent right from the start. One figure demonstrates that point while there are many others in the budget which support it. In 1997, a family with two children got €672 per year in children's allowances and now it gets €3,400. The same is true of old age pensions. It means the targets that were set under An Agreed Programme for Government can be met. We are well on the way to achieving those targets. I accept some of the caveats Senator Mansergh outlined with regard to the levels, particularly regarding the old age pension. I accept that point, but we are well on the way to achieving the targets provided overall governance maintains its steady course.
The Minister in his concluding remarks summarised well what the budget was about. It radically improves the funding for the delivery of services for the disabled and increases social welfare rates by well above the rate of inflation. It frees those on the minimum wage from income tax. It seeks to reinforce the equity of the tax system, through the plan to reform, which he outlined. It keeps inflation low to help those on lower incomes and that is a key point. Everything can be lost if inflation increases and the Government contributes to inflation.
The Minister also said the budget enhanced capital spending to improve the public services. He made a point earlier in his speech, which I regard as important, when he said we should not be shy about our achievements. Those of us who are on the Joint Committee on European Affairs were in Turkey the week before last. Countries much larger and much more powerful than Ireland are still fascinated as to how this economic miracle was achieved. That is something to celebrate, irrespective of what party one belongs to, that Ireland plc is being held up as a model to the world.
We saw what the economists had to say about us when previously they were talking about the "sick man of Europe" and the fact that the International Monetary Fund would have to intervene and take over. There has been a radical change which has transformed our self-esteem, the vision of our place in the world and which has taken us out from under the shadow of the power across the water. At least now we have a global view. We look to Europe and beyond, and have a self-confidence which my generation thought we would never see. We argued for it back in the 1960s and had particular difficulty in convincing people that we would ever achieve that transformation.
The economy will grow by 4.7% in GNP terms and by 5.1% — although the table says 5.3% — in terms of GDP. Employment will grow by 35,000, so there is still the requirement for people to come in and help this economy. Unemployment will remain low at 4.4% and price inflation will come in at 2.5%, which is close to the EU average. There is much to be grateful for and much to celebrate. The Minister said our economic growth rate was more than twice the average in the European Economic Area. The rate of spending increase in 2005 is three times the European average. The rate of public investment, at nearly 5% of GNP, is almost twice the EU average, our unemployment rate is half the average and our debt burden is among the lowest in the European Union. These are among the positive indicators in the budget.
I welcome what the Minister had to say about the review of the sheltered tax areas. While there are wealthy people who avoid tax, many of them are doing it by being non-resident. I do not approve of that. I believe if one is a patriot, one should pay tax to the country in which one is born.
Nevertheless, if that vehicle is available to people I cannot see it being closed off in terms of double taxation treaties and so on. Perhaps it may be closed and, if so, well and good, but I do not know how it can be done. Some of the rhetoric on this issue is wide of the mark. However, there is a commitment in the tables with regard to the review. It says the Minister for Finance will consider the outcome of this work and bring forward proposals for the 2006 budget next December. So it is not a review that will go on indefinitely. There is a commitment as to when the results will be available and as to the measures to be taken. Apart from the lack of value for some of those schemes, there is a general desire on everybody's part to at least have coherence with some system in place rather than the "ad hocery" which has characterised matters in the past.
I welcome the provisions on agriculture, particularly with regard to stamp duty relief on consolidation. That is an important matter, which has been discussed already. I come back to a point raised by Senator Quinn regarding value for money. There is no spotlight on the Departments themselves, however, and how they spend their money. It is not a question of how the money is allocated to the people in receipt of payments, in terms of social welfare, but how the Departments are themselves administered. A strategic management initiative, SMI, existed and made some positive achievements in terms of the delivery of public services. However, a great deal of work has still to be done in terms of what goes on within Departments and how money is being wasted, as I believe it is at times.
The provisions regarding disability are something for which we can be grateful to the Minister. Since I came into this House, some time ago, I have argued every year for increases in the moneys devoted to disabilities. I believe the Minister has done that in a unique manner. The increases are of a completely different order to anything that has been experienced before and that is to be welcomed, particularly with regard to respite care. A great deal needs to be done to at least give people some relief from the burden of having to look after, on a daily basis, members of their families who are disabled. Resources are finite, but €682 million is being given in tax allowances.
The initiative with regard to the minimum wage is particularly welcome with 650,000 people being affected. There are another 874,000 people on social welfare, in addition to disability benefit.
The initiative with regard to the minimum wage is particularly welcome with 650,000 people being affected. There are another 874,000 people on social welfare, in addition to disability benefit.
That major resources are being devoted to these areas is welcome. I could speak at length on these matters but overall the budget is a good one and we are back on target to achieving the commitments set out in An Agreed Programme for Government. I look forward to those being delivered over the next several budgets of this Government.
My colleague, Senator McCarthy, may be here to share time. Having listened to the members of the Government side one would think we were living in Utopia. There is no doubt the position has improved enormously in recent years, through the combined effort of all partners. I agree with Senator Dardis when he refers to the other members of the European Union and particularly the new member states who ask how we did it. We know how we did it and we have come a long way.
However, the fact is there are glaring inequities in society which we could tackle but which the Government chooses not to tackle. I welcome the additional funding provided in the area of disability, in particular. How long have people waited for it? It is long overdue. There are other issues which are long overdue for assistance and for which the Government could do something.
On Monday a lady visited my office in a state of considerable distress. She and her husband are pensioners in their late sixties and their pension is their only income. They have returned from England. Their son is 22 years of age and they decided to support him in going back to college. He receives no grant and they are unable to support him. He has attempted to live on very little while attending college in Cork. She told me they had arrived at a position where they simply could not afford to support him in college any more and he will probably be forced to give it up. That is the reality for a person in Ireland today who is not living in Utopia. For all the advice I could give, the amount she could get amounted to very little because of the system and the fact that he is a mature student. That he remained in employment until September means he does not qualify for support.
According to the lady, an official public servant informed him that he should have given up work six months previously in order to qualify. That is indicative of the quirks in the system. If he had been unemployed for six months he would qualify for support but he chose not to be unemployed because he wished to support his parents who were pensioners. They want to give him the support he needs in college but they cannot afford it. The cost of living, particularly bills, is so high it is eating into their income and any savings they may have.
This is an extraordinary state of affairs in terms of the kind of country we think we live in versus the reality for some people. Many of them have high medical bills and do not qualify for a medical card. In the recently announced Estimates hospital charges were increased. This is the reality. A two-tier medical card has been introduced and fewer are getting the kind of support to which they would have been entitled. The medical card scheme has been steadily eroded while stealth taxes have increased. The Estimates and this budget show no sign of dealing with that issue. While I welcome the increased investment and increased spending, particularly in the area of disability, it is long overdue.
An indication of the kind of country we are is evident from how the Government chooses to spend the country's wealth and there are many examples. I shall deal the area of child care on which I have done some research recently. According to a survey from the Central Statistics Office carried out less than two years ago and published last year, over 42% of all families with pre-school children rely on non-parental care to mind their children. A large number of working parents rely on unpaid relatives to care for their children. The number who pay a carer, relative, crèche or Montessori school to care for their children on a full-time basis has reached a high figure compared to what it was in the past. Some 50% of women of child rearing years are in the workforce. It is great that people have that choice. On the issue of pre-school children, including babies, 20,000 families pay a carer, 15,500 pay crèche and Montessori fees and 8,000 pay a relative. According to the survey 23,000 have a relative who is not paid to care for their child. The cost of child care is so high that it is becoming a disincentive for couples to have large families and to remain in the workforce.
I am aware from anecdotal evidence that the cost of child care in Dublin is approximately €150 per week. If one has two children the cost may not be €300 because of economies of scale and so on but it is a considerable amount of money. If one has a third child, one of whom is school-going, and the two younger children are in a crèche, the amount one has to pay for child care is prohibitive. There is evidence, particularly after the birth of a third child, that one parent, usually the mother, opts to stay at home.
On the European league table Ireland ranks lowest in terms of support for working parents. Not only that, we have yet to look at how we might invest in a programme of pre-school education. The voluntary sector, the nurseries and the Montessori groups, have provided great leadership in this area and there are many good quality pre-school arrangements in place. However, State support does not exist except in some pockets of disadvantage. A report by the National Competitiveness Council entitled the Competitiveness Challenge 2004, in a section dealing with pre-primary initiatives, refers to pre-primary education and the importance of investment. It refers to how governments across the world have developed pre-primary policies that stimulate early childhood development and the importance of it. It states: "There is strong evidence, therefore, that targeted pre-primary interventions could help to address educational disadvantage in Ireland, and in particular help to lower the still unacceptably high drop-out rate from secondary level education in Ireland."
In fact, the drop-out level is 18.2% and has remained at that level despite improved economic performance and an improved standard of living and so on. The experts would say we have a stubborn problem in regard to school drop-out levels particularly in teenage years which is not being addressed. One of the reasons is that the origin of the problem is not at second level but at pre-school level, as the Leader will be aware.
The report further states:
While the merits of such interventions [that is, pre-primary interventions] have already been considered in Ireland from a social policy perspective, their potential long term competitiveness benefits have not received much attention. As knowledge becomes the basis for competition, education is increasingly important to economic performance.
I put it to the Minister that our failure to invest in pre-primary initiatives is having and will have a detrimental effect on our ability to compete. This is not my opinion, it is the opinion of the National Competitiveness Council. The report goes on to state:
As knowledge becomes the basis for competition, education is increasingly important to economic performance. The 18.2% of students currently not completing secondary level education represent an untapped resource for the economy. They represent a decrease in the average productivity of our workforce. Furthermore, our innovative and entrepreneurial ability as a nation is below its potential as the educated proportion of the workforce, from which the majority of ideas and business start-ups flow, is not maximised. It is imperative that we increase the numbers of our citizens that can participate fully in the knowledge economy.
This is a plea from the competitiveness council to invest in pre-primary initiatives. Given that we have a world class economy, or so we are told, why do we not have a world class pre-school education system? We place very high value on our primary school system. Everyone agrees this should be the case because we all want our children to get the best possible primary education. While we know the importance of pre-school education, it continues to be ignored to our cost. The words "child care" did not appear in today's Budget Statement.
I welcome the Minister of State and the Budget Statement. The correct note was struck by Senator Ross who said it would be difficult for anyone to say anything against the budget, and people will have to swallow hard. This is difficult because I recall spending 1982 to 1987 in opposition when I thought the Government would never be dislodged. However, politics has a way of turning itself on its head from time to time.
I would like to put on record that we would not be in this expansive period of financial improvement today but for the decisions taken by the previous Minister for Finance in the years leading up to this budget. The Minister, Deputy Cowen, began his speech by stating this clearly. We can talk it up, talk it down and talk around it but it is a very good budget. I thought I would have an easy time during this five years because I would not have much constituency work. However, the work has begun to pile up as a result of young couples trying to buy houses. It is extremely difficult for them to purchase a second-hand house. As a result of the budget proposals, stamp duty will not apply to first-time buyers of second-hand houses up to €317,000 in value. This will be of significant benefit to people trying to buy a house in towns throughout Ireland. It is a very helpful measure. I did not think the exemption would be included in this budget, but more work will need to be done in this area next year.
Significant provision has been made in the budget for the disabled and people who are intellectually challenged — the words keep changing and one must get them right. Whoever is in Government — I hope it will be Fianna Fáil — in the period 2006-09 will find this will not change because the spend for the period has been set out. Much of the credit for improving the measures relating to people with disabilities goes to the Minister of State here tonight. He has taken a great interest in this area. Equally, the Minister, Deputy Cowen, spoke passionately in the House today on the issue. Difficult as it was, his time as Minister for Health and Children helped in this regard. He jokingly refers to it from time to time as his time in Angola. This is because of the constant strife that goes on in that country.
He always spoke passionately about the handicapped, including the capital spend and current expenditure in that area, and this aspect is included in the budget. The Cabinet's determination to be inclusive shines through in this document. We can joke about Fr. Healy and talk about Inchydoney. I have not seen Fr. Healy on television so I am not aware of what he has been saying, but there is no doubt we will hear from him.
I know. Fr. Healy will be pleased with the budget. He may have to say a prayer tonight so that he will praise the budget tomorrow. He cannot but be pleased at what has happened.
I was pleased with the mini agricultural package. I am sure the Minister of State, Deputy Parlon, had a hand in it because he has not forgotten where he came from. It is a good package which will help young farmers in particular.
I am sure the aspect which will be highlighted is taking those on the minimum wage out of the tax net. Senator John Paul Phelan made a point which I hope the Minister will answer. He said that these people will be out of the tax net in the middle of the year or following the next review of the minimum wage, and when their wages increase, they will go back into the tax net. I do not think it is as tightly honed as that. I am sure there will be some flexibility involved.
I will be honest and say that I agree with many of the points made by Senator O'Meara about child care. I know that Senator White feels the same way because she put a significant amount of work into a document which she brought to our parliamentary party meeting. I did not speak on the document but I seconded it. My two sons have very young families, and one is expecting his second child next week. One parent will have to stay home from work because they cannot afford the cost of child care. The Senator said that child care costs €150 a week but it costs much more. I was amazed at that figure. My son is paying €800 a month for one child and they will not be able to afford to pay for a second child. One parent must decide to stay at home. Both of them need their salaries, otherwise they will not be able to sustain a comfortable standard of living. It is a major dilemma and they have nobody in their immediate family to take over.
I have every reason to believe the Government is developing its thoughts on child care and there could yet be some measures in the Finance Bill. I do not know that for certain. I am only guessing. This is an important issue for people aged between 25 and 40 years and it is certainly prohibiting them from having any more children. If they have one child at school and two in a crèche, there is still all the time after school. School ends at 2 p.m. and a regime of child-minding must be put into action.
I thank the Minister of State for being here. I particularly applaud the budget. It makes very fine provision for disability, for those who are really at the edge. When one thinks about that and then about the difficulties of child care, people can scrimp and save and somehow provide for it, but they cannot do anything about it if there is a disabled person in their household. Something had to be done about that and the Government has now put in place a definite programme of action.
I welcome the Minister of State at the Department of Health and Children, Deputy O'Malley, to the House to take this debate. With the guillotine looming and the sound of anger echoing through the country the Government has been forced to recognise the wrath of the people and is seeking to appease them in this budget with attempts to reach out to voters who rejected the coalition Government in the local and European Parliament elections. The Minister for Finance, Deputy Cowen, is attempting to bury the McCreevy image. However, in terms of the reality of people's lives, he has not succeeded.
For the past seven years this Government has ignored the marginalised, the poor, the ill, the disabled, the elderly and carers. Something we expected in today's budget was the abolition of the means test for carers. That has not happened. The voices of these people were heard loud and clear in last June's elections. The results for Fianna Fáil were the worst ever in a local election since 1927.
The PDs were too cowardly to put forward candidates in the European Parliament election, despite having always portrayed itself as a pro-Europe party. Now appeasement by the Government parties is under way. That appeasement seeks to balance the scales which have been weighted towards the wealthy in the form of dozens of tax breaks. This has led to the perception that this Government is one that favours the rich. It certainly does not favour the vulnerable in society. There are several sectors, for example, the sick and the elderly, that are not properly looked after in this budget. However, a softly, softly approach is evident, with the next two very important years of canvassing in mind. Senator Mansergh mentioned that there will be greater surpluses than anticipated in today's budget. I believe this money will be targeted at voter-sensitive areas.
This budget is a well organised attempt to promote the much trumpeted new caring face of Fianna Fáil and the PDs and the newly discovered socialism of the Taoiseach, both of which ring hollow. To paraphrase that well-known saying, beware of Greeks bearing gifts — we are today wary of the newly converted Government evident in this budget, which has proved to be mostly empty words disguising an unpalatable reality.
Last year we were told much about what would be done and the budget was applauded. However, the truth came out and the Minister who introduced last year's budget has been got rid of. Sooner, rather than later, the Government will suffer the same fate at the hands of the electorate.
The Minister for Finance, Deputy Cowen, would like us to believe he is bearing gifts in budget 2005.
However, this budget is far from a giveaway and the tight purse strings across a full range of Government spending is concealed beneath the whole facade. There is evidence of this in several areas. Far be it from me to suggest that the Minister for Finance is finding the Department of Finance to be foreign territory, but it is essential that he recognises that our economy is entering another period of rapid growth and the mistakes of his predecessor must not be repeated. Last year's budget relied heavily for its impact on the announcement of decentralisation, another pre-election promise which hit the dust last week.
Those triumphal reforms will not do much good for those most affected. It is incredible that the plans for decentralisation were first mooted prior to the local elections in 1999 and that in the run-up to the last general election they were part of An Agreed Programme for Government to be delivered by 2002. Prior to last year's local elections it was announced yet again with much fanfare in the budget. It must go down in history, and I said this last night, as the most promised broken promise. The electorate, however, is waiting in the wings——
——to give the verdict it gave to the Government last June in the local and European Parliament elections. If our economy is once again entering a period of prosperity, dubbed "tiger II", the resources the Minister will have at his disposal are a direct result of the effort and industry of the people. That must not be forgotten. We should not applaud politicians all the time. We must applaud the people who worked hard to make our economy work.
The people are watching their hard-earned money and the Government is accountable to them. We will be keeping an eye on it over the next two years of this Government's term of office; I do not believe it will last even two years.
A false loosening of the purse strings will fool no one. The apparent pre-budget increases of €2.5 billion shrink dramatically to €1.5 billion when automatic pay rises for public servants are deducted, a figure hardly likely to make much difference to public services. The Government has cut funding to local authorities yet again. It has opened the floodgates to higher local charges and this will be evident over the next couple of months. When councils strike the rates there will be higher business rates and a worrying deterioration in local public services. Once again we will see crippling, unfair stealth taxes in higher charges to householders and higher charges for local businesses. As always these charges will hit the most vulnerable and disadvantaged in our society. However, as is manifestly obvious, this Government simply does not care.
The increase in the permitted local authority expenditure is a meagre 1% but the local authority pay bill would necessitate an increase of approximately 3%. The allocation will not even cover inflation. With 11,393 applications for disabled person's grants received in July this year, some €60.94 million would be needed if 10,000 were to receive the grant at the same average cost as last year, yet the Minister allocated a mere €52 million in the Estimates. Likewise, funding for the task force on special housing aid for the elderly is hardly enough to cover inflation. The allocation of €348,000 will only cover 116 grants for the installation of central heating for the elderly, at a cost of approximately €3,000 per house. The outcome is as always that the least able must bear the brunt of the Government's ineptitude.
Despite Government hype, there is no funding in the budget for the promised 2,000 extra gardaí.
I wish to make a point of order. Senator Bannon made a case for the Irish Road Haulage Association, which is his right. However, he failed to declare that he was nominated to go forward for the Seanad by the Irish Road Haulage Association. He should declare that special interest.
I congratulate the Minister for Finance, Deputy Cowen, on his first budget. It was a big day for the Minister and we all appreciate that he has done a good job. I also wish the former Minister, Deputy McCreevy, well in his new portfolio. As stated by Senator Ross, Deputy McCreevy and the Government set the tone for this budget, for which the work was carried out over many years.
I welcome the increases in social welfare, particularly child benefit. Senator O'Meara referred to child care and children dropping out of school. As I have stated, the first responsibility is on parents to ensure children go to school. No matter what problems exist, it seems to fall to the Government to try to resolve them. However, parents must take some responsibility in this regard. Child benefit is a substantial payment to parents and there should be an obligation on parents to ensure their children go to school. The payment of child benefit could perhaps be tied to children's attendance at school.
The money is for the child. In many cases, it is not the fault of the child if he or she is not at school. From my experience of voluntary organisations, I know what can happen. I spent many years involved with that great organisation, the Society of St. Vincent de Paul, which often dealt with alcohol-related problems in homes where no responsibility was taken for ensuring children attended school. Perhaps there should be a link between child benefit and school attendance. If this ensured that children attended school, it would be worth doing. While it is not a popular point to make, some action may have to be taken in certain cases.
The increase of €14 in unemployment assistance is a positive one. I warmly welcome the increase in the threshold for the payment of stamp duty to €317,500 for first-time buyers of second-hand houses. This duty was an awful penalty for young couples starting out and it also put pressure on the sale of new houses, which were exempt up to a certain figure. While a second-hand house might suit a first-time buyer, stamp duty forced him or her to buy a new house. I welcome the fact that stamp duty will be phased for houses costing from €317,000 to €635,000 and, overall, the measure is a major improvement. It is also positive that workers on the minimum wage have been taken completely out of the tax net.
The Minister stated his commitment to the area of disability. Some €240 million of the Estimates for next year is for people with disabilities and some €300 million per year has been committed for the period 2006-09. As Senator O'Toole stated, the Minister was compassionate in this regard. Given the manner in which the Minister spoke when he announced this measure, I have no doubt he is totally committed to it. If he is in a position to do so, he will ensure the funding for disability is ring-fenced.
The Minister also referred to the area of tax incentives. I am glad he will review this area because there is no point throwing out the baby with the bath water. For 25 years, not one house was built in my home town of Ballymote in the north west, which is in a rural renewal area. However, because of the rural renewal incentive, some 150 houses have been built there in the past three years, with planning permission granted for another 200. Three bedroom semi-detached houses are still selling in Ballymote for €155,000, which provides a great opportunity for the young.
I welcome the announcement in regard to the taxation of farmers, including that of the accredited tax relief on farm pollution control measures to assist the EU nitrates action programme. The flat rate of VAT refund, which goes back to farmers and is not an increase, was raised from 4.4% to 4.8%, stock relief for farmers, including young trained farmers, was extended for a further two years from 1 January 2005, and stamp duty relief was introduced for the exchange of farmland between farmers for consolidation purposes. In addition, farmers are to be allowed to average certain direct payments for tax purposes. This is all to be welcomed. Given all these improvements and the fact that there is no increase in indirect taxes on fuel, drink, cigarettes or otherwise, it is a marvellous budget which is to be welcomed.
At the macro level, in 2005 the Irish economy will grow by 5.1% in GDP terms, employment will grow by approximately 35,000, unemployment will remain low at 4.4% and inflation, to keep us competitive, will hover at 2.5%. These are key indicators of economic stability and, as the Leader stated, of the new Minister for Finance continuing to keep the tiller steady after the departure of the former Minister, Deputy McCreevy.
The biggest issues facing young people in Ireland are the cost of housing for first-time house buyers and the cost of child care. Stamp duty relief has been provided for first-time house buyers. They will incur no stamp duty on second-hand houses costing up to €317,000 and will pay reduced rates on second-hand houses costing up to €635,000. That is a positive move.
I am aware there is only a paltry reference to child care, although Senator O'Meara said there was no reference at all. In page B10 in the budget——
—— of certain tax incentive schemes and tax exemption, their impact and operation. The Leader will recall that I mentioned at a meeting of the parliamentary party a possible tax incentive for child care facilities and it was stated that child care facilities would be examined.
Currently, some 55% of women participate in the workforce. If we are to deliver these potential growth rates in the economy we must get more Irish people working. Some €660 million is paid out annually on lone parent allowances while only 55% of women work. We need to get more of those parents back into the workforce, see that they are educated and are ambitious for their children. They could contribute money to the Exchequer rather than receive social welfare allowances.
This is a very small step but the women in the Fianna Fáil Parliamentary Party will continue to lobby the Government to improve the number of private and community crèche places available, because we will not keep the economy on a growth path if we do not get more women back into the workforce.
Senator Henry has indicated that three minutes will be enough for her. I hope it is not churlish of me to take most of the time.
It is a privilege to be allowed as a Member of the Seanad to attend the other House because there is a certain drama and sense of occasion about budget day. That was very evident today. I will note some local colour. I looked up at the Visitors Gallery at one point and it was crammed with middle-aged, male, middle-class people. There was one woman on one side of the Gallery and one on the other. The budget went a long way but it tells one something about Irish society that so many of the decision makers, so many of those who had lunch in Leinster House today and were in the Gallery, were male. Women were very sparsely represented.
That is very valuable work but it is not the entire contribution women should be making to Irish society. I was very glad that departing from the printed script which we have before us in this very efficiently produced booklet, the Minister paid tribute to his predecessor, former Minister, Deputy McCreevy, who laid the foundations for this budget. Although it must be gratifying for him to be sitting in Brussels it must also be dreadfully irritating and aggravating to see someone else spending the money his policies were involved in generating.
This budget is a significant achievement and there is no point in us trying to pretend otherwise. I found it amusing that some of the Opposition representatives in the Dáil claimed that the budget delivered too little too late and so on. That is nonsense. They should accept that the budget is good and that the Government lived up to its promises. The most significant element, which greatly delighted and heartened me and is a major step for this country, was the removal from the tax net of all those on the minimum wage, which is pretty scant. It would be niggardly for us on this side of the House not to recognise this as a remarkable step. I do not care which party took this step and it would be mean to deny that the Government did so.
We must pay tribute. Of course there was an element of politics in the decision, a reaction to local election results and so on but that is the way democracy works.
That is the way people make their feelings felt on the doorstep and if the Government responded, I am not complaining. I would complain more if it did not respond.
It was significant that Fr. Seán Healy was involved in the discussions. In an article in The Irish Times recently he wrote that all the hoopla surrounding the budget each years tends to obscure the most important fact that decisions are underpinned by a vision of a future Ireland. Towards the end of the article he wrote that the vision of the future that should guide Government budget decisions this year should be one where Ireland's infrastructure and social provision deficits are addressed. I think they were, very largely. However, there was an absence of any clear specific reference to child care. I could not find it — even on page B10, C10 or E10. I do not think it is there.
More significantly, there was a regrettable failure to put in a budget envelope to protect the clear unambiguous statement in the major international forum of the United Nations that Ireland's overseas aid contribution would reach 0.7% of GNP in the next two years. That is a shame. With the money we have we could and should have done that. It is a reproach that such a provision was not contained in this budget.
I am not particularly partisan on this issue. I am a member of the Oireachtas Joint Committee on Foreign Affairs which unanimously made that point. The Chairman, who is not notable for his antagonism to the Government or for his desire to ruffle Government feathers, actively supported that point. I regret that it was not possible to make this provision.
In an attempt to be helpful I will make a suggestion. Regarding motor vehicle taxation, why do we not follow the French example and abolish all tax on motor vehicles? That would be popular with the people. One could balance it by increasing the tax on petrol. That would directly target the gas guzzlers, the SUVs. It would be environmentally friendly and very much the right thing to do.
With those two mild reservations, I welcome the budget. We see the Government moving in a healthy, humane, decent and civilised direction and I welcome that.
I thank Senator Norris for sharing his time with me. I echo his remarks about money for overseas development aid. I regret that it was not possible to see the contribution increased and I hope that the Minister involved will do the best he can to fight his corner for development aid.
I welcome the aid given to the disabled although I regret the provisions will take so long to implement. We will also have many more disabled people surviving year on year thanks to the improvements in medicine.
With such a formidable person as Senator White in the Fianna Fáil Parliamentary Party I felt sure that child care would have been adequately dealt with in this budget. I speak in particular as the president of One Family, formerly Cherish. Senator White is quite right when she says it is essential that we have adequate child care to get people off social welfare and back into the workforce. While I welcome the increase given to single mothers, to do anything in line with the Government's action plan against poverty and social exclusion, and Sustaining Progress, much greater increases would have to be given in this budget. The budget should have increased child income support to €149.90 per month for the first and second child and to €185 for the third and subsequent children. The current levels are much too low for the plan to come into being.
There is also the problem of income support for one parent families, which is less than €150 per week. We all talk about obesity in children but, as Owen Keenan of Barnardos pointed out to me the other day, many children are malnourished and go to school hungry. Many of them come from these families. While they have been given something, they have not been given enough. We must break that cycle of poverty and having read the Government's excellent manifesto, I thought that was what it wanted to do.
It is important we try to make sure people retain secondary benefits. The figure has been frozen at €317.40 per week since 1994, but they should have been increased to over €400 per week. Medical cards for all children would make a huge difference. While I welcome what is in the budget, I very much regret the situation regarding child care. It is disastrous for women. Nothing has happened for years. I will have to rely on Senator White who, I am sure, will keep after the Minister for Finance to do something about it as soon as possible.
I commend the Minister on the first of his three budgets. This budget builds on the very strong foundation laid by the Minister's predecessor. It firmly underpins the Government's support and commitment to prudently and wisely spend €45 billion of taxpayers' money. It is to the benefit of sections of our community to ensure investment in areas of real concern to people such as health, education and infrastructure, which have been prioritised.
After the past seven years of improvements, particularly the growth in public services which have been provided and which, as other Senators pointed out, are the envy of Europe, I am delighted the Minister has continued the commitment to getting value for money for the taxpayer while at the same time further enhancing the position of those who are marginalised or who are less well off. That fine balance between growth and revenue and expenditure has been maintained in this budget — if anything, it has been even more finely tuned. It takes account of the more vulnerable areas and ensures the maxim — used by Seán Lemass — that a rising tide lifts all boats is almost a reality. The result are there for everyone to see. I see them in my area where, following two or three generations of unemployment, children now have the opportunity to go on to third level where it was never heard of before. These things did not happen by chance and Senator Ross fairly acknowledged how they have been managed. There are, however, still areas which have to be worked on. This Government and the previous one can take credit for these changes. By targeting the resources and by ensuring services provide value for money, benefits have accrued and will continue to do so.
Speakers have said they cannot comment adversely on the budget. The difference the changes have made to people's lives are as a result of previous budgets. I commend the Minister on continuing the work done to date. I look forward to his next two budgets. It is a good day for the country and for the Government.
I thank Senator Brady for sharing his time. This is a good budget which has been acknowledged by commentators on the national airwaves who usually would not be that sympathetic to the Government. I am glad it reflected the republican ethos of our party. That has been illustrated by the redistributive aspects in that the tax bands have been widened and, as other Senators have acknowledged, those on the minimum wage have been excluded from any taxation, which is a very welcome development. First-time buyers will no longer have to pay stamp duty on second-hand houses, which is welcome, as are the extra provisions for the disabled, particularly for those with intellectual disability. The increase in the old age pension brings it close to the target in the programme for Government of €200 per week. I welcome the increases in child benefit while acknowledging that more needs to be done in the child care area. The budget heralds the continuation of the maintenance of the strong economic progress under the stewardship of DeputyCharlie McCreevy from 1997 to 2004.
On the macro issues, it is good to see the convergence of the growth rates predicted for GNP and GDP, as stated by Senator Dardis. That is welcome because it shows the domestic economy is contributing well to the growth in the economy. Inflation has been maintained at 2.4%, which is welcome, as is the unemployment rate of 4.4%.
In regard to unemployment, there are regional disparities. I know the 35,000 which have been created is very welcome but coming from the constituency of Wexford, there is a need for greater emphasis on economic and unemployment blackspots. Being excluded from the BMW region is disadvantageous to Wexford. I would like that disparity to be addressed.
I thank Senator Brady for giving me the opportunity to briefly welcome the budget and congratulate the Minister for Finance on a good job in getting the balance right between, as Senator White said, economic stability, the development of the economy and sharing the benefits of a thriving economy among people in most need. Most of the issues have been mentioned but it is important to recognise that 650,000 people have been taken out of the tax net. That is a remarkable achievement in such a short time.
I will not dwell on the multi-annual funding being put in place for people with disability across a range of activities. What is important in that area is that it is a multi-annual programme, which means that if funding is not spent in a particular year for whatever reason, it can be carried forward to 2009. On many occasions, we have heard delegations from the disability sector trying to get action from Government. The Minister has taken that action for which he should be congratulated.
I heard some of the comments in the media immediately after the budget and the only people to criticise it were those in Fine Gael.
I am glad to have the opportunity to respond to some of the points made but before I do, I wish to make a number of comments. In the past the Government has been wrongly criticised for not looking after the ordinary man on the street. This budget proves that is not the case and shows the Government's concern for the ordinary man on the street.
The budget is focused on lower income households. Since 1997, the Government parties have brought about a position where the proportion of those exempt from tax, that is, taken out of the tax net altogether, has increased. This is against a background of huge growth in employment — an increase of approximately 400,000 since 1997 — substantial growth in per capita incomes over the period and the introduction of a statutory minimum wage. The Government is now fulfilling its commitment to exempt the minimum wage from the tax net and I, for one, think this is a very substantial step in today's budget. The widening of the bands has taken 52,100 taxpayers off the higher tax rate.
Senator John Paul Phelan made a number of points to which I wish to respond. Regarding motorists, there is no increase in excise duties.
Every budget that I can remember had a sting in the tail for motorists. That is not the case today. The Government was very concerned not to add to any of the inflationary pressures that exist.
Senator John Paul Phelan also mentioned the excise relief for small breweries. If the Senator is pointing to such small details, he must have had to look hard to find an issue about which to argue.
Small brewers employ some 130 people and are competing against some of the significant players. They do not enjoy the same scale and this provision is an attempt to provide the opportunity for them to compete in the market. We all appreciate the Senator's remarks about the dangers of alcohol and so on. However, this is an equitable measure.
I understand there has been universal approval for the provision of stamp duty reliefs for first-time buyers. The bands account for the houses which the majority of young people are likely to afford.
The 2005 budget is about helping and respecting people. It is concerned with new investment in hospitals, schools and roads. It serves to cut taxes, an area in which my party has a strong view. It is about a comprehensive and sustainable approach to the issue of disability. It aims to continue the strategy that has made Ireland a global economic success and the envy of other countries in Europe and worldwide. I am delighted to be a member of a Government that has introduced such a positive budget.